1、Climate-related perils are on the riseboth threatening banks loan portfolios and offering new business opportunities.By Camille Goossens,Rocco DAcunto,Ghizlene Azira,and Aude SchonbachlerFires,Floods,and Loans:How Banks Can Deal with Increasing Climate RisksCopyright 2023 Bain&Company,Inc.All rights

2、 reserved.1Fires,Floods,and Loans:How Banks Can Deal with Increasing Climate RisksJupiter Intelligence|Bain&Company,Inc.At a Glance Wildfires,droughts,and other climate-related perils threaten banks loan portfolios,yet many have only a general sense of their vulnerabilities.We expect real estate ass

3、ets exposure to physical risk to rise over the next couple of decades,likely reducing the value of collateral and damaging banks mortgage business profitability.Banks that take the right steps soon could improve their financial stability,customer retention,and compliance with emerging regulatory sta

4、ndards.Measuring physical risk requires new tools,capabilities,forecasting horizons,and dataall of which have been challenging to source and embed.As if banks dont have enough to worry about with high inflation and the recent turmoil around liquidity and long-term assets,now,another risk looms incre

5、asingly largenamely,the destructive power of the natural world.High winds,floods,and other hazards pose significant threats to real estate assets and more broadly to the productivity of businesses within banks portfolios.To better understand the risks and trends accompanying these perils,Bain&Compan

6、y analyzed data provided through a unique strategic partnership with climate risk analytics firm Jupiter Intelligence.Banks have begun to understand their climate risks,in part because regulators are starting to probe the vulnerabilities of portfolios risk through climate stress-testing.But few bank